In Re Estate of Goldman – 5/30/2007

June 8, 2007

Arizona Court of Appeals Division Two Holds That An Estate Should Be Valued, For Abatement Purposes, Not As a Fixed Amount At Date of Death, But As Finally Distributed From The Estate.

Elliot Goldman passed away in 1995, and his brother Jay Goldman was appointed personal representative. The first article of Elliot’s will provided that all expenses of his last illness and funeral, costs of administration, and estate and inheritance taxes were to be paid from the residue of his estate. Article four of the will created trusts for each of Elliot’s two children and also included several specific bequests. Article five of the will made devises to several charitable organizations, including the Jewish Community Foundation of Southern Arizona. The first and fourth article payments, which the will directed to be made before the fifth article devises, exhausted the estate’s assets as originally valued at the time of Elliot’s death. However, in 2003, the estate’s real property was appraised again, and an increase in its value resulted in an estate balance of $1,844,650.64 as of November 2004. From Elliot’s death to November 2004, Jay made payments to all of the fifth article devisees other than the Foundation, evidently because he had “concerns about the ability of the Foundation to accomplish the goals [Eliot had] intended.”

The Foundation petitioned the probate court for an order to show cause seeking payment of the devise to it. The trial court found that the devise to the Foundation had not abated and granted the Foundation summary judgment. In so holding, the court found that “abatement of devises under a will is applied to the value of the estate at the time of distributions, not to the value of the estate as determined at date of death.” Jay appealed, arguing that date of death values are considered in determining whether abatement occurs.

The Court of Appeals affirmed the trial court, holding as a matter of first impression that abatement occurs or does not occur based on the value of the assets as finally distributed from the estate. The Court found various provisions of the Probate Code instructive in reaching its conclusion that “a decedent’s estate is not fixed at the time of his or her death, but rather, includes property existing at that time and throughout the administration of the estate.” The Court rejected Jay’s policy argument that a date-of-distribution valuation rule for abatement purposes would create a conflict between a personal representative’s duty to unabated beneficiaries (whose interests would often be best served by a prompt disposition of estate assets) and abated beneficiaries (whose devises might not abate if disposition of the estate were delayed in the hopes that, over time, the estate’s value would increase sufficiently to cover their interests).

Chief Judge Pelander authored the opinion, with Judge Howard, Presiding Judge, and Judge Vasquez concurring.